Mobile Portals and Making a Profit
By Andrea Orr, Mon Sep 18 00:00:00 GMT 2000 is one of a growing number of companies racing to cash in on the emerging market to provide Internet data over mobile phones and other wireless devices. Last month, America Online decided there was so much potential in the wireless content market that it decided to buy Quack. But there's just one problem...

Quack is not entirely sure that people will pay for wireless horoscopes, traffic reports and weather forecasts, or even more mission-critical content like email and stock quotes. As fast as all these new services have been rushed to market, one critical detail -- the underlying business model -- has lagged behind. Although Quack now has the advantage of a well-backed parent company, shortly before it was acquired, it revealed its concerns about the business model. It said it was worried that before some universal system for charging customers was put in place, consumers would come to expect to get all that wireless data for free.

"There's tremendous potential for premium services," explains Randy Corke, a spokesman for Sunnyvale, Calif.-based "I just hope the industry doesn't give everything away."

Of course, an all-free model might work, if wireless device makers can attract advertisers. And Quack is in a better position than many rival "voice portals" since it has a business model of licensing its underlying speech recognition technology to other companies.

But while several voice portals like TellMe Networks are currently giving away all sorts of content from restaurant listings to business finders away for free, Quack believes it shouldn't have to be that way.

"Today you pay to call 411," reasons Corke, referring to the popular -- and not cheap -- U.S. phone service that will look up phone numbers anywhere in the country. "You pay for that service, and customers accept that model."

He figures that if people pay to use such a service -- some when they are in their own homes and have a phone book in the next room -- they would be all the more willing to pay for information when they are on the road, nowhere near a LAN line or a PC.

"Imagine if you could call up and say, 'I'm on the corner of Fourth and Main and I need directions to the nearest movie theater.' I think you'd be willing to pay for that."

Maybe. But no one seems to be counting on it. Far more often than people are talking about what to charge customers, they are talking about how to shrink banner ads designed for a PC into a form small enough to fit onto the tiny little screen of a cell phone. Impractical as that might sound, some companies say a tiny little wireless ad might have even better attention-grabbing potential than the banner ad on the PC. An advertisement consisting of just three lines of text may be pretty small, but it also may be hard to ignore when it is placed on a miniature screen.

Along with charging consumers or selling ads, there are some other possible business models for wireless content. Content providers, for example, may be able to charge the device maker for encouraging more frequent use of their products.

Sound familiar?

The problem is reminiscent of the early days of the PC-based Internet five years ago, when several content sites tested subscription models, but generally had little success. Although is not opposed to subsidizing the services with ads, and even believes wireless advertising is immeasurably more effective than the banner ad, it also feels the original content providers on the Internet may have moved too quickly to give away for free what consumers would have been willing to pay for.

"It is a situation where there is already a consumer behavior in place, and it becomes hard to reverse," says Corke.

As most Web users know, the Internet today is largely a free Internet, made possible through banner ads and other promotions.

What to charge?

Assuming consumers could be convinced to pay for the next generation wireless Internet, several more problems may arise about how much they will pay. One company addressing these underlying challenges is Portal Software, which makes a billing platform for Internet services that enables them to impose pricing models based on usage. The company was developed around the basic concept that even if consumers will pay for wireless content, it makes no sense to charge them the way they have typically been billed for regular phone service. Portal insists such a model, based on the number of phone minutes, simply doesn't translate to data moved over a cell phone.

"The amount of time spent on the phone will not be important," explains James Moorehead, Portal's market development manager. "If you charge customers on a time basis, it will mean they are getting incredibly overcharged." One example Moorehead cites is that of a consumer to pays to read an electronic newspaper on the Internet. How much sense does it make to charge that person for the time spent reading the paper? Would it not make more sense to charge a flat rate for a subscription? Or better yet, charge for the number of articles read -- a level of precision that is not available on paper newspapers?

Portal has not yet worked out how much consumers should pay for that wireless newspaper, the interactive golf game, the stock quotes or the traffic report. It says that will be up to its customers. The main thing it is advocating is a simple price structure in which consumers pay in a way that makes sense to them, rather than by some obscure measure like bytes.

"If you charge per byte, there's just not that many bytes being transferred. But the value of an interactive golf game is much higher than just the value of the bytes involved. It's much more interesting to play against another person online, than it is to play against a computer," says Moorehead.

Andrea Orr covers the gamut of technology for TheFeature. She is also a correspondent for Reuters in the Palo Alto, California, bureau.